Macy’s to furlough majority of its 130,000 workers

The exterior of a Macy’s department store is seen at the Landmark Mall on January 5, 2017, in Arlington, Virginia. – Investors hammered retailers early January 5, 2017 as US stocks opened near flat following reports of disappointing holiday sales from department stores Macy’s and Kohl’s. Macy’s slumped 12.8 percent and Kohl’s 17.2 after both reported lower sales in the critical November-December period. Macy’s also said it plans to cut as many as 10,100 jobs in a response to the decline of shopping in stores due to the rise of e-commerce. (Photo by Andrew CABALLERO-REYNOLDS / AFP) (Photo credit should read ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)

NEW YORK (AP) — Macy’s says it will stop paying tens of thousands of employees who were thrown out of work when the chain closed its stores in response to collapsing sales during the pandemic.

The majority of its 130,000 employees, including stock people and sales clerks, will still collect health benefits, but the company said that it is transitioning to an “absolute minimum workforce” needed to maintain basic operations. Macy’s has lost the bulk of its sales due to the temporarily closing of all 500 of its stores starting March 18.

The move is perhaps the most dramatic sign that even big-name retailers are seeing their business evaporate and that the $2 trillion rescue package passed by Congress and signed by President Donald Trump last week may have come too late for some.

Nordstrom said last week it was furloughing a portion of its corporate staff. And shoe company Designer Brands Inc., which operates DSW Designer Shoe Warehouse, furloughed 80% of its workers, effective this past weekend. Analysts expect more furloughs to come as retailers won’t be able to pay their employees as cash reserves run lower.

The furlough of workers will have negative consequences for an economy in which the retail industry supports one out of four workers.

“This could push us further into a damaging recession that will last longer than the duration of the crisis,” said Neil Saunders, managing director of GlobalData Retail.

More than 190,000 stores, including J.C. Penney and Neiman Marcus, have temporarily closed, accounting for nearly 50% of the U.S. retail square footage, according to Saunders. Discounters, grocers and wholesale clubs that sell essential items like groceries, on the other hand, have remained open, though they have their own challenges of keeping up with shoppers who continue to stockpile.

When announcing the temporary closures, most retailers said they would keep paying their workers but they were looking at a two-week timetable. That moment has now passed and the furloughs have become increasingly necessary as the coronavirus rapidly spreads and forces people to stay cooped up in their homes.

The big question is how much of these furloughs will lead to permanent layoffs. Swedish retailer H&M said earlier this month that it may be forced to permanently layoff some its employees after temporarily shuttering 3,441 of its 5,062 stores globally.

Macy’s said that there won’t be as many furloughs in its online operations, which continue to operate.

Macy’s said those who are enrolled in health benefits will continue to receive coverage with the company covering 100% of the premium.

“We expect to bring colleagues back on a staggered basis as business resumes,” the company said.

To survive in the meantime, Macy’s has suspended its dividend, drawn down its line of credit, frozen hiring and spending, and cancelled orders. It said is now evaluating all financing options.

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